Unformatted text preview: and Growth Vertical need not mean fixed LRAS can shift right
– P Population Capital stock
Technology Real GDP rises Prices fall – Good deflation
– AD can also shift right LRAS LRAS’ P0 P1 AD
y0 y1 y Short Run Aggregate Supply
Short Run Aggregate Supply “Sticky “ wages and prices – Contracts
– Menu costs P
AS AS slopes up – Price rises
– Value of labor rises
– If w fixed then L rises
– y rises as a result y What Causes a Recession?
What Causes a Recession? Assume we start at y0 – In LR equilibrium
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This note was uploaded on 02/25/2014 for the course BUSINESS 2101 taught by Professor Gerst during the Spring '12 term at Temple.
- Spring '12